When an emergency occurs, the first thing that comes to mind is how to raise the necessary funds quickly.

These days, most people rarely have a couple of thousands in the bank for a weekend getaway or an unexpected air conditioning repair. Borrowing from friends or relatives may not help because almost everyone is struggling to stay afloat during these difficult economic times.

But banks take a long time to approve almost any type of loan, including a short-term loan. Due to its flexibility, a short-term loan may be the answer to your problems. So what is a short term loan?

This article will explain what is a short term loan, how to obtain a short-term loan in Singapore, and the benefits and drawbacks of doing so.

What Is A Short Term Loan?

A short-term loan is obtained from a bank or a licensed money lender to meet a temporary need. The main benefit is that you can get your loan approved within a short time and, in most cases, within 24 hours.

Short-term loans typically have higher interest rates due to their short repayment periods. Most lenders require you to repay within a few months to a year. You also do not need collateral or guarantors to obtain loans on a short-term basis.

With a short-term loan, you can borrow between $500 to $35,000.

Types Of Short-Term Loans

There are various kinds of short-term loans available for individuals and businesses. Here are some of the most common ones:

Emergency Cash Loans

These short-term loans are useful for unexpected expenses. While they can be used for anything urgent, they often come with high interest rates and fees.

With this type of loan, the trick is to repay it as soon as your pay comes in so you don’t get penalised.

Payday Loans

As its name suggests, these are short-term loans that you repay on your next payday. Most licensed money lenders offer them.

They are handy for unexpected bills such as a car repair or medical bill. But they have high interest rates and fees, so use them with caution.

Merchant Cash Advance

Merchant cash advances provide funds to businesses in exchange for a percentage of daily credit card returns.

Your business sells a certain percentage of future credit card sales to a lender in exchange for a lump sum of cash. This loan is ideal for companies with consistent sales and requires funds quickly.

Since there is more risk involved for the lender, interest rates are typically higher than other types of short-term loans. However, if your company requires cash quickly, this may be your best option.

Line Of Credit

Lines of credit, also known as credit lines, are revolving loans available on demand. Businesses with a credit line from a lender can borrow money whenever needed.

The company will receive a certain amount, which it can use and repay over time. Interest is only charged on the amount used.

This loan is ideal for businesses that want more control over how much money they borrow and when they make repayment.

With a line of credit, you can get more money but the interest rate is usually pretty high.

Invoice Financing

Invoice financing is an excellent method that involves borrowing against the value of outstanding invoices. Businesses can request a specific amount of money from a lender even if their invoices are unpaid.

The unpaid invoices serve as a form of collateral. The best part about invoice financing is that it provides businesses with the cashflow they need without having to wait to get paid.

Pros And Cons Of Short-Term Loans

While a short-term loan can help you pay off urgent bills when you don’t have enough cash on hand, they have a couple of drawbacks.


  • Quick approvals
  • Simple application process
  • Less paperwork
  • Do not require a good credit score
  • Different types of short-term loans are available


  • High interest
  • Extra charges for late payments
  • Risk of getting trapped in a debt cycle
  • May expose unsuspecting borrowers to loan sharks

Alternatives To Short-Term Loans

There are some options you can consider if you need a short-term loan in Singapore.

Personal Loans

When faced with a cash crunch, it is prudent to seek the most affordable and convenient loan option. A personal loan is not too hard to get and has a longer loan tenure.

You can also use the funds for almost any purpose and repay the loan in manageable installments.

Paying your bills on time can help you improve your credit score and qualify for future unsecured loans.


If your car engine fails, for example, you do not have to wait until the next payday to have it repaired if you lack the money.

An overdraft allows you to borrow money from your current account by taking out more money than you have in the account, hence the term “overdrawn”.

This is of course chargeable. Note that the interest rate can be high.

Business Loans

This is a loan designed primarily for commercial purposes. Before granting approval, a lender examines the company’s business plan, collateral, annual income, and credit score.

If all is in order, the lender gives a specific amount of money to a business. The company repays the loan plus interest within the time frame specified.

Foreigner Loans

Unlike in other countries, foreigners living in Singapore can borrow money from banks and licensed money lenders if they don’t have enough money for food or rent. To begin, foreigners must provide a valid work permit and proof of residence, and be employed.

In most cases, foreigners should have a consistent monthly income of $30,000 to $70,000. You must be at least 21 years old, working and residing in Singapore.

Guarantor Loan

A guarantor loan should be at the top of your list if you want a longer repayment period. This type of loan allows you to borrow against the good credit scores of family members or friends.

It can be a lifesaver if you have a bad credit score. But failure to repay may force your guarantors to pay on your behalf or lose their collateral.

How To Apply

You can apply for short-term loans online or personally at the bank or licensed money lender. It will be easier to get your loan approved if you have a good credit history and consistent income.

However, if you have a poor credit history and inconsistent income, consider other options such as a guarantor loan.

Before applying for a short-term loan, consider the interest rates. Due to their short tenure, they can be very high, making your loan more expensive than anticipated.

Most lenders in Singapore require these documents during the application process for a short-term loan.

  • Payslips for the last three months
  • NRIC or passport
  • CPF contribution statements
  • Bank statements
  • Credit score
  • Income tax statements

Where To Apply For Short-Term Loans

Short-term loans often have speedy approvals. You can receive your money within hours from some lenders if you provide the necessary documents.

Private Lenders

Although the Singapore government does not allow private lenders to hold moneylending licenses, they can grant loans to accredited corporations and investors.

Depending on the type of short-term loan you need, you may be required to pledge collateral, which you may lose in the event of a default. Compare at least three lenders and choose the best terms and interest rates.

Licensed Money Lenders

There are more than 100 licensed money lenders in Singapore waiting to serve you. Check that your lender is on the Ministry of Law’s list of licensed money lenders first. All its contact details, including its license number, should match what is on the list.

Regardless of your income or loan amount, licensed money lenders can only charge a monthly interest rate of no more than 4% on secured and unsecured loans. Late payments will incur late interest of no more than 4% in addition to the normal charges, as well as a late payment fee of up to $60.


Although banks provide a variety of loan packages, their lengthy approval process and thorough credit checks may deter you. But they are an excellent option if you are not in a hurry and want lower interest rates.

Banks place great emphasis on credit scores more than licensed money lenders, which may lower your chances of approval.

How Long Will Approval Take?

A bank may take three to seven days to approve your application. For other lenders, it depends on the approval criteria and amount of money requested.

When time is of the essence, a reputable licensed lender such as U Credit can provide funds in a day. Most licensed money lenders have online platforms where you can submit an application easily.

Choose The Right Short-Term Loan And Lender

As inflation continues to rise, times are becoming tougher. As a result, some may struggle to find cash for emergencies and unexpected expenses.

Now that you know what is a short term loan, you can consider U Credit if you are in financial bind and unsure of what to do next.

As a licensed money lender, we will help you get back on your feet with our convenient loan packages. We offer short-term and long-term loans.

Whether you want to pay your bills or make a business investment, contact us now or apply for a loan today. Your personal information is secure, and the process is entirely confidential.